Will Maximizing Stakeholder Value Get You Up In the Morning?

Recently I listed to a business show on the radio and they had an almost eleven minutes long interview with a CEO of a public listed IT company.

What struck me the most was, that by the end of what was quite a long interview, I still had no idea WHY the company existed, other than to maximize stakeholder value, and it´s not that the CEO didn’t get opportunities to explain it. The questions by the interviewers were very open-ended and there was plenty of time to pitch their mission. After listening to the interview, I browsed the company’s website to check if it was “just” a case of negligence by the CEO, but I wasn’t able to find any clear answers their either.

During the entire interview the CEO talked a lot about WHAT the company is doing to improve financial results. The company is three years into a four-year turn-around process and the CEO was hired specifically to get the company back on track. At the beginning of the interview he explains that the goal of the strategy is to improve profitability by increasing productivity and focusing on fewer offerings. They have shifted their offerings from marketing and supporting standardized systems to developing and supporting their own systems. They have withdrawn from smaller less profitable markets and increased their presence in larger growth markets. They have also set-up a billability based incentive system for consultants and established a process of monitoring performance every second weeks. If consultants aren’t delivering enough billable hours, they are moved to another country with a higher demand for their skills. How is that for motivation?

In Simon Sinek’s book Start With Why, he discusses how great leaders inspire people to act, by giving people a sense of purpose or belonging that has little to do with any external incentive or benefit to be gained. Being inspired is a much stronger motivation and it’s also less fragile, since the motivation to act is coming from within – it’s deeply personal.

My motivation behind this post, is not to pick on the particular company, which is also why I haven´t disclosed their name. Instead I want to use them as an example of an early 20th century view on strategy that I believe will be out-smarted and out-competed by companies, that understand how truly to inspire people to rally behind a purpose that is intrinsically motivating. Something just shy of making the world a better place.

I do acknowledge that the company discussed above has done financially better than ever before. I also acknowledge that you have to keep an eye on financial performance and that companies do need to make a profit to keep in existence. I do however wonder, if they could do even better, attract and inspire even more top talent and get even more loyal customers, if they were in it not only for the money. Paradoxically, I believe there is a great chance that their financial results would improve even more, if they stop focusing so much on them.

As always I would love for you to share your opinion on the subject using the comments. Would you feel passionate about working for a company, which primary goal was to maximize shareholder value? If not, what purpose would get you up in the morning?